A major study of the Irish beef industry by international management consultants, McKinsey, recommends that the number of Irish beef processors should be reduced to four from the current 16. These 16 processors currently operate 39 different meat plants.
The study, commissioned by Forbairt and a summary of which was published in the Irish Farmers Journal, concludes that the profitability of the beef sector could be increased by between £120 million-£160 million provided key initiatives were implemented.
In its summary report, currently being considered by the industry, McKinsey says the Irish beef industry lacks strategic direction and suggests a number of major initiatives, including a self-funded buyout scheme to reduce the number of processors to four. Companies and plants leaving the industry would be compensated by those remaining, using the benefits that would flow from the rationalisation.
McKinsey also recommends the formation of "market groups" to improve vertical integration between retailers, processors and groups of farmers and the improvement of quality.
The industry should also try to ensure full value from markets by launching marketing initiatives in four high priority EU markets defined in the Bord Bia marketing report as Britain, France, Holland and Italy.
The elimination of excess capacity would yield immediate savings of £19 million a year. The rationalisation of processing and rendering costs would yield a further £14 million a year. Eliminating undercutting and improving bargaining power versus third countries would yield a further £20 million a year.
In addition, closing part of the gap that has opened up between the value realised by Irish and European beef processors would produce an additional £30 million-£60 million a year.
